Volkswagen: Competitive Analysis and Market Strategies Report

This report provides a comprehensive analysis of Volkswagen's competitive position in the global automotive market, with a specific focus on its strategies and performance in Germany and the USA. The introduction offers a brief overview of Volkswagen AG, its history, and its evolution into a multinational corporation. The main body includes a comparative analysis of Volkswagen's market position, examining its strengths, weaknesses, and the competitive landscape in its key markets. It also addresses the issues Volkswagen needs to consider when trading across borders, such as cultural and legal challenges. Furthermore, the report discusses strategies for enhancing Volkswagen's business, including adapting to the fuel emission scandal and the challenges posed by competitors like Toyota, BMW, and Mercedes. The report also references the emission scandal and the company's efforts to recover. The report concludes with recommendations for future business planning and market strategies.

BUSINESS PROJECT

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................2
1. (a) Comparative Analysis of the Volkswagen competitive position in its various markets....2
1. (b) What issues does the Volkswagen need to consider when trading across borders............8
2. Discuss what Volkswagen needs to consider enhancing their business................................12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
Multinational companies are those which are trading and operating in more than on
nation of world or they are having their existence in almost all countries of world. In this current
analysis there would be study on one of the largest automotive company which is Volkswagen
AG. This company is the German Multinational company that was founded in the year 1937 by
the German Labour Front. Volkswagen in year 2016 was the world's largest automotive seller
company with having production of about 6.07 million units in that same year. The organisation
was at its starting producing only luxury cars which were unaffordable for common people this
meant that company was having very low customer base during its early times. Thus, to increase
this base and its popularity among people of Germany and around the world company decided to
make their projects with name of People's Car. This is also regarded to as current slogan of
company.
In this current assessment there would be introduction of the company and what are the
marketing or competitive strategies which they are making at present or what issues or problem
do the company face. As the company is trading across its borders in numerous countries so it is
common that management would be facing many general issues like that of cultural or legal one.
At the end of this report conclusion and recommendations for coming years plan would be given
so that this could help company in their better way.
Volkswagen AG which is world famous German automotive company is having its
operations and factories almost all around the globe. They are producing, manufacturing and
selling world class models of car and van which is for almost various people like they are having
luxurious, sports, sedan and small cars as well. They are following immense competition by
various car manufacturing companies like that of Toyota (which is the largest company), BMW
Mercedes etc., and Volkswagen is the public limited company which is being listed on Frankfurt
Stock exchange and London Stock Exchange as well. There are various car brands that are
included under this group like that of Audi, Bentley, Bugatti, Lamborghini, Seat, Skoda and
Porsche. Other than this they are also having motorcycles as well, like that of Ducati. Company
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is the largest brand in Europe with having approximately 20% of the market share which in year
2010 had sales record of about 6.29 million with the worldwide share was 11.4%. Merely on the
same time company is also fighting to make up its presence in world after the fuel emission
scandal in year 2010 then in 2013 it become world's most fuel efficient car with its Volkswagen
XL1 model.
It was found by US Environmental Protection Agency (EPA) that at the time of normal
driving conditions of car emission controlling software was shut down which then increased the
pollution to about 40% more. After company admitted that they were using defected device then
they later on called off about 482000 cars with the four cylinder 2.0 litre TDI engines. Company
was fined to about $18 billion and other criminal charges.
Volkswagen is been chosen in this current report making as company after facing gas
emission scandal it is rising up into market with having stronger competitive position. It is been
used due to it rising up its strength and overcoming weakness into market which they are having.
MAIN BODY
1. (a) Comparative Analysis of the Volkswagen competitive position in its various markets.
Comparative analysis would be included to as comparing two companies on the bases of
their process, products, qualification, systems and data. So in this part there would be analysis of
Volkswagen and its two market namely Germany and USA (Saranga, Schotter and Mudambi,
2018). Company is getting very tough competition from various competitor s like that of General
Motors, Toyota and BMW in across the world. Volkswagen is having its presence in all markets
of world especially in German and US markets as they are having high amount of sales and
production of company. The mission statement of company in all its market around world could
be that of working with high qualified professionals who are devoted to provide best form of
services to their customers in market. This particular mission would be then lined up with its
environmental motive which is that of creating safer surroundings, providing quality of products
and those should be safe for customers as well.
Germany:
In the market of German which is the home country of Volkswagen they are in current
year 2018 are recovering with the market up of 8% as there was downfall in last year. The
demand of SUV and luxury cars were increasing which is up to 30% of rise and then the sales of

luxury cars increased up to 32% but that of compact cars was same as that of 2.6%. Till the year
2012 company was on second position in terms of manufacturing and selling of car that too on
worldwide level. They are having their assembly plants all around the world including countries
like that of India, China, Brazil, Poland, South Africa and Indonesia (Volkswagen's U.S. market
share from 2012 to 2017). After it was majorly hit by emission scandal of 2015 sales of company
was affected to much greater extent and thereafter company somehow managed to recover by
increasing their sales in German market.
The sale of Seat brand raised to 38% in the starting of 2018 which increased the
expansion of company and its profits as well including SUV as well. However, on other hand the
sales of diesel cars of Volkswagen decreased to about 12.5% and the market share was about
33.4% only. Company is regarded to as bestselling car models in German car market in year
2017 which was ahead of Mercedes Audi and BMW although they were having lower sales and
market share was also low. As there was no change in the sales of Volkswagen in German
market in year 2017 as compared to that of 2016 but still it was the best sellers. On the contrary
Mercedes whose sales increased to about 4.8% then also it was on 2nd position other than this
Audi which is the part of Volkswagen AG group only was having decrease in their sales to about
2.2% (Volkswagen's share of new car registrations in the EU from March 2017 and March
2018). They were having lower down and weaker market share in both years of 2016 and 2017
as well but towards the end of 2017 company introduced many strategies like that of giving
discounts to its customers and launching of new models of car.
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Figure 1: Volkswagen's share of new car registrations in the EU from March 2017 and March
2018.
[Source: Volkswagen's share of new car registrations in the EU from March 2017 and March
2018]
It could be analysed from the above figure about the registration and demand of
Volkswagen from March 2017 till March 2018 has been varied and so much changes have been
made during this period. It was highest in August 2017 which is 11.3% and lowest in starting
which is March 2017. The share of new car registration within whole of EU on March 2018 that
is termed to as demand of Volkswagen car was about 10.5% that is sustainably good enough.
This means that the demand of company into the market especially that of EU is increasing and
thus sales would be going up and rising.
Then in the current year 2018 company announced that till May there was about 3.1
million registration of passenger cars of Volkswagen
USA:

Volkswagen Group of America in USA which is the subsidiary company of Volkswagen
AG Group is having its headquarters in North America. Here in USA company is producing
majorly 5 of its brand namely Audi, Bentley, Lamborghini and Bugatti and it is also controlling
the VW Credit Inc., this VW credit Inc., is the financial and credit service providing cooperation
on Volkswagen. It is having about 20 operational facilities in whole of USA as of 2008 data
which was founded in year 1955. The main objectives of company are to provide attractive, safe
and environmental sound vehicles that are to increase their competitive advantage over others in
market. The total sale of models of Volkswagen in year 2016 was of 322948 which were more
than any other car brand model of other companies. But after USA decided to exit the Paris
environmental agreement Volkswagen was in fear that their competitive edge would be loosen
up which was in year 2017. As the care industry of German car maker are having very strong
existence in the market of USA on the bases of their environmental standards.
Figure 2: Volkswagen's U.S. market share from 2012 to 2017
[Source: Volkswagen Aims to More Than Double U.S. Market Share with Push Into SUVs, 2018]
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The marketing and other strategies of company is having unmatched competitive
advantage as Volkswagen is having ability to maintain their brand identity and also achieving
economies of scale. Other than this company is having the largest brand portfolio as compared to
all other automotive companies of world and they are also fighting with their rivals to remain in
the market. Volkswagen's new TOGETHER 2025 strategy is letting them above their emission
scandal and extreme market pressure as well under which they would be introducing about 30
new electric vehicles till the end of 2025. In which they also planned out to develop new
competence into their technology based on battery and digitalization (Volkswagen Aims to More
Than Double U.S. Market Share with Push Into SUVs, 2018). All these would be done to
improve the profitability and efficiency of company looking out with the objectives achievement.
The revenue of company is been widely spread among all of their brands, geography and
products which is better than that of other competitors of firm. Majority of the income of firm
would be coming from that of its Passenger cars that is about 74.5% rest are from commercial
vehicles (12.4%), financial service (11.2%) and power engineering (1.9%). In terms of global
income Europe is having the highest sales that are about 42% and that of Germany to about 20%.
On the other hand negative publicity of brand is weakening their market structure which
is mainly due to its Emission Scandal of 2015 from which they are trying to cope up. Company
admitted this and then was found guilty of violating the environmental rules in majority of
countries ending up to pay about $16.2 billion. Above this brand image and brand positioning
was also hardly hit and effects these customers and profits were also decreased. Then the recall
rates of Volkswagen was highest in USA as compared to all other parts of world that was about
every 1805 vehicles about 1000 vehicles were called off. Then in current year company is
planning to recover from the scandal with target of 5% increase in their share especially that of
SUV’s share. Company is planning to relocate its position in world market with grabbing market
of sports cars and to compete with other US brands within the country (Volkswagen's U.S.
market share from 2012 to 2017). With this Volkswagen would be doubling up their current
share of automotive market up to 1.9% and then becoming volume player in US.
Volkswagen till the year end of 2018 would be introducing 2 new car models including
that of Sedan as well into the markets of USA this is one step ahead of in gaining up share in
market. Company in the US market at present is very much weak at its sale and profits of SUV
and CUV so they are trying to boost up their segment in these two models only. Not just this they

would also be increasing their global market share of automotive through the increase in line up
with 19 new models till 2019. With the help of this increase in product portfolio they are
planning to boost up their total global sales volume up to 40% which is at present about 15%
only. All of their market strategy is aimed at SUV and CUV car model only this is also keeping
in mind the American car lovers or buyers as they mostly prefer these only. In year 2011 when
Volkswagen started its Tennessee plant in USA it was producing initially Atlas and Passat Sedan
model. The factory was having its capacity of at least production of about $1.9 billion which
increased due to Atlas sale to about 70% and then producing around 2.5 million vehicles per
year. This is basic reason as to why company shifted its concentration in US market from
compact cars to midsize Sedan and started producing and promoting Atlas to make customer
base stronger. Till the year 2020 company announced to introduce its more electric vehicles like
that of SUV and CUV especially in California with the average sales of around 5000 car
annually in 2025.
Company and management are trying to reconstruct their brand image and increase their
sales in USA market which was hindered due to emission scandal for which they invested $3.3
billion. All these steps which they took were into the favour of increasing sales, profits,
production and ultimately regaining their lost image into world and home market as well.
Volkswagen are planning to spend its budget mostly on sports cars and electric vehicles which
would be helping them to gaining share in world markets (Volkswagen's U.S. market share from
2012 to 2017). They spend about $1.2 billion in US alone into more cars which are that of SUV
and CUV.
Porter's generic strategy
Generic competitive theory which was propounded by Michael Porter included three
forms like that of cost leadership, focus and differential strategies.
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Figure 3: Porter's generic strategy
[Sources: What Is Competitive Advantage, 2018]
Cost leadership- this is called the ability of company to produce product or service at lower cost
than that of others. But is they are been able to produce equal quality of products like that of
competitors that too at lower cost so that Volkswagen is having higher profit margin.
Focus- under this company is trying to aim or focus on few target market or products rather than
trying to target all of them (What Is Competitive Advantage, 2018). It is generally used by
smaller business as they are not having ability to resources all of market rather they focus on
need of customer and try to improve their products.
Differential- it is keeping products of company different from the others so that they could make
it stand out from others.
1. (b) What issues does the Volkswagen need to consider when trading across borders.
Trading across borders is indicating that one particular company is utilising both time and
money which they are having and then investing them into other countries. This would be having
more emphasis on logistical process involving both imports and exports of products and services.
As Volkswagen is having its operation into about all across nations of world including Asia,
Africa, Europe and Middle East countries being the company of Germany (Hertenstein and
Williamson, 2018). It is quite natural that they could face majority of problems and issues at the
time when they are trading across borders especially at the time of exports and imports of goods

and services. It is the duty or responsibility of company that they are analysing what are the
challenges or issues which they need to face at the time when they are either importing or
exporting their goods and services abroad.
Doing their business on international level would be including procedural necessities,
legal formalities, various type of documentations, contractual agreements, packaging details and
other procedures related to that of freight and custom brokers. Trading would be majorly
relaying on to exporting and importing of goods and services opening new offices or production
plant are not generally part of trading across borders. Within this practice there would be
including the cost and time that is associated with logistical process of trading across borders. As
this would be having cost of doing business abroad but not involving the tariffs linked into and
devising about important documents (Aguilera, Judge and Terjesen, 2018). These would be
comprising domestic transport, documentary compliance and border compliance as well. But
each country would be having their own issues and problems which company like that of
Volkswagen need to consider at the time when they are trading across borders. Those would not
be same as other nations as every company and countries would be having their own problems.
Firstly they need to ensure or strategically planned before they start exporting or trading with
other country that what could went wrong at the time when company is trading. If the company
is having very good reputation and doing business under specified profits then they must be
planning in such a way which is not hindering or creating problems with their trading into some
other country.
The issues which Volkswagen needs to consider at the time of trading across borders
would be as follows:
Planning need to be thorough:
This could be defined to as most important factor of doing business across borders as it is
not possible without proper and thorough planning and researching of market or that particular
country (Kester, de Rubens and Sovacool, 2018). If the company like that of Volkswagen is
starting their import and export of vehicles or any manufacturing parts then they need to plan out
step by step bases so that market research which they are doing is good and effective as well. It
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would be impossible for company to settle themselves into other market if they are not been able
to plan out on proper bases. The research would be based on legal, political, cultural and target
market bases other than this they also need to gather information about workforce or employees.
Overall planning is very much important which includes not only focusing on one aspect like
that of target market or legal formalities or laws related to import and exports car or other
vehicles. Volkswagen needs to follow and regulate to them on regular bases so that they could be
able to grab higher shares in marketplaces.
Help from third party:
Other than planning and researching what is important is that of taking help from third
parties and considering this as issue. All the local service providers and advisers would be doing
their part of activities like helping Volkswagen in their effective and efficient planning with
market and helping them to realise what they could gain and how to do this (Tomczak, Reinecke
and Kuss, 2018). If company is not been able to receive support from third parties then they
would not be capable to do business and earn profits. They must be analysing that who all are the
third party vendors like those of legal advisors, suppliers and all others who are involved in
trading across borders.
Flexibility:
Whatever planning and researching that company is doing should be all based on should
and what should not be included within must be all flexible which means that they are not
making any rigid policy. All what they would be including their documentations or other
important things should be elastic enough that they are constantly rearranging that over and over
time. This issue could arise at time when company is engaged into too much rigid planning and
researching that they are not been able to change that after they met with any uncertainty as well.
Ventures or acquisitions:
These both are good and efficient options available with Volkswagen if they are planning
to start trading across borders. Joint ventures would be meaning that they are making agreement
with some other party which is already been in market and coming with joint efforts of shared
risk and profits as well. In this way they are able to delegate risk, efforts, cost and investment
then setting up into new country which is certainly not known to them. While on other hand
acquisition would be meaning that they are taking some existing firm under them and then they
are doing the business on international bases (Kalverkamp and Raabe, 2018). Ventures and